and factory,inc (7035) — Company information | ENVALITH

Business

and factory, Inc. was founded in September 2014. Under the mission of "delivering & to everyday life," the company operates the App Business (approximately 95% of net sales), centered on manga apps (Manga UP!／Manga Park／Manga Mee／Sunday Webry, etc.) co-developed with major publishers such as Square Enix, Shueisha, Shogakukan, and Hakusensha, as well as fortune-telling apps (uraraca／Hoshi Hitomi no Uranai). In addition, the company has the RET Business, which operates six "&AND HOSTEL" locations in Tokyo and Osaka, and Other Business, which involves commercial utilization of manga IP. Consolidated net sales for FY2025 (ending August 2025) were ¥3,209 million. Main customers are end users of smartphone apps and publishing partners collaborating on manga apps.

Business Model

Manga apps derive their main revenue from download-based charges for electronic manga and ad network advertising income. The fortune-telling app "uraraca" earns time-based charges for phone and chat consultations, while "Hoshi Hitomi no Uranai" generates monthly usage fee income. Joint development with major publishers enables stable supply of popular titles and risk diversification. Since MAU directly affects revenue scale, the company actively invests in advertising and promotion expenses (¥800 million in FY2025 (ending August 2025)) to drive user acquisition.

Company Strengths

The company has entered into capital and business alliances with Shueisha, Shogakukan, Hakusensha, and Square Enix, jointly developing Manga Mee, Sunday Webry, Manga Park, and Manga UP!. This has established a system for stable supply of popular titles owned by publishers, diversifying the risk associated with developing original titles.

As of the end of August 2025, the average MAU of manga apps and web services stood at 8.75 million, an approximately 4.3-fold increase from 2.04 million at the end of May 2018. Even during phases of MAU decline, paid ARPU and advertising ARPU have grown, confirming an improvement in per-user revenue.

The UI/UX design capabilities cultivated through smartphone app development are being applied not only to the development and operation of manga apps and fortune-telling apps but also to service development for &AND HOSTEL, functioning as a foundation for synergies across business segments.

ENVALITH's Perspective

The average MAU of the manga app peaked at 11.61 million at the end of August 2023 and has continued to decline, falling to 8.07 million by the end of May 2026. This has been compounded by a gradual decrease in paid revenue due to the conclusion of serialization of popular titles, along with a decline in advertising ARPU driven by slowing ad rewards and lower ad network delivery unit prices, resulting in App Business revenue of ¥2,122 million, down 8.1% year on year. The market environment is also a headwind, as the growth rate of the e-book market has slowed to single digits and moved into a mature phase, making it difficult to foresee a recovery in revenue until signs of MAU bottoming out emerge.

The full-year consolidated earnings forecast for FY2026 (ending August 2026) calls for revenue of ¥3,072 million and operating profit of ¥0 million (unchanged from the previous forecast). As of the cumulative nine months through the third quarter, the company recorded an operating loss of ¥45 million, meaning that the fourth quarter alone would need to generate operating profit of at least ¥45 million to achieve the full-year forecast. The pace of loss reduction compared to the same period last year has been notable, and the effects of cost structure improvements are becoming evident; however, uncertainty remains as to whether profitability can be achieved amid a contraction trend of an 8.7% year-on-year decline in revenue. The consolidation of narrative's bridge business is scheduled to begin from the fourth quarter, and its contribution will be a key focus.

With an effective date of June 1, 2026, the company took over narrative's bridge business (revenue of ¥101 million, operating profit of ¥5 million, for the fiscal year ended January 2026) through an absorption-type company split, for consideration of ¥18 million in cash. The acquisition of a business foundation with major IP holders such as publishers, along with specialized personnel, is expected to accelerate growth in the Rights Business. On the other hand, narrative's representative director is a related party who also serves as an executive of the company (Mr. Takamoto Ohara, with a shareholding ratio of 21.28%). Although a third-party valuation institution (Result Partners) has provided an assessment of the fairness of the transaction terms (DCF method: ¥16,388 thousand to ¥19,514 thousand), investors should continue to monitor this as a related-party transaction.

Performance Trend

For the cumulative nine months of FY2026 (ending March 2026) [September 2025 to May 2026], net sales were ¥2,208 million (down 8.7% year on year), operating loss was ¥45 million (compared with a loss of ¥169 million in the same period of the previous year), and quarterly net loss attributable to owners of parent was ¥39 million (compared with a loss of ¥172 million in the same period of the previous year). Net sales, after shrinking sharply from ¥5,024 million in FY2024 (which included one-off factors such as real estate sales), continued to decline gradually to ¥3,209 million in FY2025 and a full-year forecast of ¥3,072 million for FY2026. Meanwhile, thorough cost reduction efforts led to a substantial improvement in App Business segment profit, which rose 154.3% year on year to ¥148 million. Although the slowdown in the growth rate of the e-book market (up 3.9% in fiscal 2024) has weighed on sales as a market environment factor, the break-even point has steadily declined thanks to improvements in the cost structure. Total assets stood at ¥1,774 million (down ¥246 million from the end of the previous fiscal year), and the equity ratio was 47.8% (versus 43.9% at the end of the previous fiscal year), indicating that financial soundness has been maintained.

Growth Strategy

Rebuilding the earnings base through cost optimization of existing businesses and diversification into fortune-telling, IP utilization, and the Rights Business

Through optimized staffing and operational efficiency improvements, total company expenses were reduced from ¥248 million in the same period of the previous year to ¥200 million. App Business segment profit improved significantly to ¥148 million. Even amid declining MAU, the policy prioritizes securing profit by maintaining paid ARPU and improving the efficiency of advertising revenue.

Effective June 1, 2026, the company succeeded to narrative's bridge business (net sales of ¥101 million and operating profit of ¥5 million for FY2026 (ending January 2026)) for cash consideration of ¥18 million. This acquisition secures a transaction base and specialized personnel with major IP holders such as publishers, promoting diversified secondary use of content and accelerating growth of the Rights Business. Results consolidation begins from the fourth quarter.

Net sales of Other Business (Manga IP Utilization Business) reached ¥34 million cumulatively through Q3 of FY2026 (ending August 2026) (up 100.9% year on year), turning profitable with segment profit of ¥2 million. The IP of the manga app portfolio operated under the App Business is being monetized through both merchandising licensing and advertising/promotion utilization, and opportunities will be expanded through deeper collaboration with IP holders following the succession of narrative's business.

Against a backdrop of continued expansion in inbound demand, accommodation demand from foreign nationals remained solid, and occupancy rates stayed at high levels. However, due to the absence this period of the accommodation property brokerage fee (¥58 million) recorded in the previous period, RET Business net sales came to only ¥51 million (down 42.6% year on year). Accommodation sales themselves remain solid, and the occurrence of brokerage transactions is the main driver of fluctuations in performance.

and factory,inc

Business

Business Model

Company Strengths

ENVALITH's Perspective

MAU decline trend continues, falling to 8.07 million as of end-May 2026, down over 30% from the peak at end-August 2023

While the narrowing of losses through cost reduction is commendable, achieving the full-year operating profit forecast of zero requires turning profitable in the fourth quarter

The strengthening of the Rights Business through the absorption-type split of narrative is a step toward medium- to long-term revenue diversification, but attention should be paid to the transparency of the related-party transaction

Performance Trend

Growth Strategy

Disclaimer

and factory,inc

Business

Business Model

Company Strengths

Strong collaborative foundation through capital and business alliances with four major publishers

Track record of operating manga apps with an MAU scale of 8.75 million

Cross-business synergies centered on UI/UX design capabilities

ENVALITH's Perspective

MAU decline trend continues, falling to 8.07 million as of end-May 2026, down over 30% from the peak at end-August 2023

While the narrowing of losses through cost reduction is commendable, achieving the full-year operating profit forecast of zero requires turning profitable in the fourth quarter

The strengthening of the Rights Business through the absorption-type split of narrative is a step toward medium- to long-term revenue diversification, but attention should be paid to the transparency of the related-party transaction

Performance Trend

Growth Strategy

Maximizing profitability of existing manga and fortune-telling apps and improving cost structure

Strengthening the Rights Business through the absorption-type company split of narrative's bridge business

Expanding merchandising and advertising/promotion business utilizing manga IP

Securing stable earnings in the RET Business (&AND HOSTEL) by capturing inbound demand

Disclaimer